Market fallout from Trudeau, futures higher, chip stocks rally, picture perfect M&A
What a wild 24 hours in news. At least we can finally put an end to the speculation of what will happen and know with certainty…that yes, I am launching a podcast 😊. Check it out here.
Trudone: The Canadian dollar is holding on to gains this morning after Justin Trudeau announced his resignation yesterday. However, it is still trading under $0.70 US. Parliament is now suspended until March 24th while the Liberal Party runs a leadership race. Last night, Mark Carney confirmed he is considering entering the race. This shouldn’t be much of a surprise, his interest has long been speculated. We only saw mild moves higher in the energy sector yesterday on the back of the resignation. As for the controversial increase to capital gains tax, its fate remains unclear. Initially it was thought that since Parliament is prorogued, the increase was dead. However, the Canada Revenue Agency recently said that it would continue to apply the proposed increase even if an election were called. Put this in the limbo column. Perhaps the CRA will come out in light of yesterday’s developments to offer clear guidance.
Chips & dip: Futures are mildly higher this morning after a tech-fueled rally south of the border yesterday. Chip stocks are leading the way again this morning (more on that below). For all the high-fiving over Trudeau’s resignation on Bay Street, the TSX actually fell on the day. Today we get a read of job openings in America and service sector activity (75% of the American economy) at 10amET. Yesterday’s moves were characterized by a rally in tech and not much else. The bond market continues to be under pressure with yields on the US 10-year at the highest level since May 2024. Higher interest rates may prove to be a difficult headwind for stocks. Right now, the market has not fully priced in any more rate cuts in the United States.
How much for a mention?: Nvidia’s Jensen Huang gave his keynote address yesterday at the Consumer Electronic Show in Las Vegas. Shares are poised to hit an all-time high this morning (up 2% in the pre-market). The rally means it overtook Apple as the most valuable company in the world for a second time. Huang unveiled the latest slate of gaming and AI chips. The bigger moves are in the companies that got a shoutout from Nvidia. Shares of Micron are up 4% in the pre-market after Nvidia said the company is a supplier for its new chips. Uber is up 2% after announcing it is collaborating with Nvidia to developed AI powered autonomous driving technology (maybe it can just tell you why your Check Engine light is on). A little known company called Aurora Innovation is surging 40% right now after announcing a pact with Nvidia to deploy driverless trucks at scale. I have to wonder what this means for Canada’s privately-held Waabi which does the same.
Notable Calls: A lot of interesting analyst changes this morning. In retail, Lululemon was upgraded at Bernstein. The stock has been on a tear recently, but still off its highs of the year. The analyst thinks Lulu’s Americas business has bottomed and is set for a modest recovery. The upgrade is notable because it is the first time the analyst has ever viewed Lululemon as a buy. Aritzia, meanwhile, is getting downgraded by Raymond James ahead of earnings on Thursday. “This is largely a valuation-driven downgrade which we know can be unpopular for investors,” wrote Michael Glen in a note to clients, “But…we would be hesitant to expect much more in the way of multiple expansion from this point.” We will see how this ages when earnings come out Thursday. A pair of Magnificent 7 stocks are getting downgraded this morning. Apple was cut to sell at MoffettNathanson. They are warning Apple could fall more than 20% because sales have been sluggish, regulatory pressures have been increasing, and tariffs could hit the supply chain (although they didn’t the last time around.) Tesla was downgraded at Bank of America, but the analyst actually increased his price target which implies 17% upside from here. Cue eye roll. Lastly, RBC is upgrading Carvana following a short-seller report by Hindenburg Research. Carvana shares are down almost 30% from the peak in the last year after a *checks notes* 3,900% rally in the last two years. The used car retailer has been an object of fascination after it seemed to be on the verge of bankruptcy out of the pandemic, but instead staged an epic comeback. Hindenburg has said this was on the back of all kinds of chicanery driven by self dealings between the father-son duo behind Carvana. In the first upgrade since the short report, RBC says the controversial pullback is a buying opportunity.
Picture perfect: Shares of Getty Images are rocketing up more than 45% after reaching a deal to buy Shutterstock. Shutterstock is rallying 25% as investors clearly love these two visual content libraries coming together. The game changing transaction is being celebrated especially in light of fears that AI is a massive disruptor. Why pay for a content library when AI can just generate any image you want? Shares of Getty have fallen 50% over the last year. The combined companies will now have a value of over $3.5 billion.
